09 January 2007

How to Make a Trillion Dollars: Dee Hock, Systems Thinking & Modern Management

One of the proponents of systems thinking is Dee Hock (although he calls it by a more interesting name, one that reflects how he has customized many of the notions and principles of systems thinking: chaordic, a state on the border of chaos and order). You probably don't know his name but you should. It is yet another thing that baffles me about the modern world: so many people know of Bill Gates and Jack Welch and so few know about Robert Beyster and Dee Hock. (Beyster I'll save for another story.)

Dee Hock was the first CEO for a company that has now passed $1 trillion in sales. That's right. $1 trillion. The company is VISA and it represents Hock's attempt to fundamentally rethink the foundational notions of an organization. Before going into that, I'd like to speak briefly about what he was up against, as it was nothing less than the dominant and pervasive intellectual perspective of the 20th century.

Pragmatism is today's dominant perspective. This matters because it is this that the systems thinking proponent finds himself up against. A pragmatist (as most every manager and employee is) will want to know the answer to how. "How do I do this?" It is no coincidence that pragmatism’s creation and popularization has followed the creation and rise of the modern knowledge worker, a sea of experts who make their living because they know how to diagnosis an X-ray, write computer code, or negotiate legal contracts. A pragmatist looks at how to make it through the obstacle course more quickly; a systems thinker challenges the design of the obstacle course, wondering why it should be so difficult to navigate if, indeed, the goal is to reduce time. One doesn't get to trillion in sales by simply performing better inside of a million dollar company.

Back to systems thinking and Dee Hock. What Hock really did was create two things. One, he understood that money was, ultimately, a measure and symbol of exchange. Its natural evolution from sea shells to gold to fiat currency was to finally take the form of blips and bytes on a computer. The credit card was a perfect medium for this. Secondly, Hock created an ecosystem. He knew that any card that gained acceptance had to simultaneously be accepted by banks, merchants, and consumers. And yet no one party would accept a card that the other two parties had not accepted. Hock didn't tell banks how they could sign up households. Rather, he created a set of fairly minimal rules that allowed players within this context to perform. Dee Hock was not so much a Willie Mays or even Sparky Anderson. Rather, he was Abner Doubleday - inventing the game rather than telling people how to play or even playing himself. In this alone he could stand as an archetype of systems thinking.

YouTube recently sold for $1.65 billion. Those founders did not create content, generating millions of hours of video. That would have been as impossible as Dee Hock's quest to make a trillion in loans or sales. Rather, the YouTube founders created a context in which people can voluntarily create and distribute content, just as the sea of bankers who minute by minute grant loan approvals to consumers within the ecosystem Dee Hock helped to create.

There is so much to say about the distinction between pragmatism and systems thinking, but I will limit myself to this observation. A manager asks "how" will I get this done. An entrepreneur asks, "who" will I need to get this done? A pragmatist focuses on problem solving and making something work. A systems thinker focuses instead on creating a context (like Hock's credit card ecosystem or YouTube's site) that encourages participation and natural consequences for individual imitative and actions.

How does systems thinking change anything if it doesn’t directly address the question of how, leaving that instead to the pragmatists and players who will inevitably show up? As it is gradually adopted as a worldview, replacing pragmatism as pragmatism replaced Enlightenment philosophy before it, systems thinking will change the context of how we frame our world, articulate problems, and choose goals. How will systems thinking change anything? By changing the context and rules of the game, it will, eventually, change everything.


Cody McKibben said...

So how do we create a new "game" that encourages social innovation players to bring their ideas to the table? And even to encourage non-social innovators to become social innovators/entrepreneurs...?

Ron Davison said...

Cody - for my nickel, that is THE question. Part of it is an expectations game, changing the definition of what it means to be an employee. But I predict that there will be lots of pieces to the puzzle - from systems thinking to corporate revolution to globalization.

Aaron Edell said...

It is odd that we hear not of the world's potential trillionaires and what the significance of that is. And I think you are right, it has everything to do with pragmatism. There is a new political satire blog about it that your or your readers may be interested in: http://twotrillionaires.blogspot.com

das said...


Wow great analysis !
I am browsing for existing ideas of how trillions are made, because quite simply am embarking in this adventure.


The answer is : radically different thinking. Your question is marked by pragmatism, maybe if you system think the question itself, you will find the answer, or you will become enlightened :)